Bad Fits: The Causes, Extent and Costs of Job Skills Mismatch in Canada

Abstract

About 13 percent of Canadian workers have skills mismatched to their jobs. Although this is somewhat in line with an average of around 10 percent among OECD countries in an international survey, Canadian policymakers have two reasons for concern. Firstly, there is significant variation across socioeconomic groups. While workers with higher educational attainment are more likely to be over-skilled, women, immigrants, and older workers are more likely to be under-skilled for their jobs. In the case of immigrants, the under-skilled problem entirely disappears with time spent in Canada, highlighting the importance of settlement policies that provide rigorous and accessible skills training, language programs, and job-search workshops for newcomers. Secondly, these results could worsen in the years ahead in the face of technological development and demographic aging that are occurring in the labour market at the same time as the role of newcomers in Canada’s labour force is growing. As it is, the majority of workers across occupations need to use cognitive skills such as literacy, numeracy, and problem solving at least once a week at work. More importantly, there is no occupation where these skills are not required at all. This study’s results highlight the importance of providing more opportunities for skills development and lifelong learning for all workers and better addressing individual training needs, particularly, among underskilled people such as older workers and new immigrants. Businesses – in addition to providing training opportunities for under-skilled workers – can reduce mismatches within their organizations by appropriately reassigning tasks, providing relocation assistance and finding innovative ways to use workers’ skills in order to optimize productivity. Governments can help reduce skills mismatch with policies that enhance labour market flexibility, ease labour mobility, and more importantly, increase participation in lifelong learning.